After Monday’s bell, shoe designer and manufacturer Crocs (CROX) announced better-than-expected results for its second quarter. CROX also announced a company restructuring, which led to a big jump in Crocs’ stock and a technically significant move that active investors and traders might be able to jump on for some follow-through buying.
Specifically, Crocs earnings came in at 36 cents per share, which beat analyst estimates by a nickel, but were lower by about 25% year-over-year. However, revenue for the quarter improved 4% to $376.9 million, also better than analyst estimates of $372.76 million.
But more important were Crocs’ restructuring announcements. They were a long time coming, but to be expected as investment firm Blackstone Group (BX) took a $200 million stake, or roughly 13%, in CROX stock back in December 2013.
Crocs said it will let go of about 180 of its nearly 5,000 employees and close 100 of its retail stores. Additionally, in an updated sales strategy, CROX will focus on its core products and jettison non-core products. Crocs also is looking to increase spending on marketing.
CROX Stock Charts
Those who have followed CROX stock over the years know that shares saw a classic pop-and-drop period in 2011, as the stock rose much too steeply, only to erase about five months worth of gains in a matter of a few weeks.
In the bigger picture, CROX stock has seen a choppy going since 2012, marked with big, daily/weekly rallies or selloffs that then quickly stall or fizzle. Notable through a multiyear lens is the double bottom from late 2012 and one year later in late 2013, as well as the resistance line dating back to the September 2012 highs. Crocs’ 200-week moving average (red line) served as resistance in late 2013, and with Tuesday’s rally, CROX stock has once again moved back up to this moving average, which currently also coincides with the late 2012 diagonal resistance line. A break past this area could be bullish for more than just a few days.
On the daily chart, note that while Tuesday’s rally moved the stock into the late 2012 trend resistance line, it also pushed the stock out of a tighter seven-month trading range (on a great burst in volume, I might add). The question now of course is whether Tuesday’s rally was just another of the one-day wonders to which traders in CROX stock have unfortunately come accustomed to in recent years.
From where I sit — given the restructuring news, the involvement of Blackstone and the bullish picture on the chart — this time around it looks like CROX stock stands a much better chance of continuing the ascent in coming weeks.
Active investors can consider buying CROX stock on a break past Tuesday’s highs near $16.82, or wait for the stock to consolidate Tuesday’s gains somewhat and then move higher again. A measured multiweek upside target could get the stock moving toward $18.50, while as usual, any major bearish reversal of Tuesday’s rally would put the stock right back into neutral territory.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.